Women should save more to make up for gaps created by lower pay and unpaid caring, a provider has suggested ahead of International Women's Day, as the UK’s 35% gender pensions gap remains largely unaddressed by policymakers.

Encouraging women to save 1.15% extra into their pension could compensate for a loss created by childrearing, Scottish Widows said as International Women’s Day celebrates its 115th anniversary on Saturday.

The UK’s gender pensions gap was first measured by the Department for Work and Pensions in 2023 but not since, despite a commitment to report annually. The huge gap is generally attributed to both labour market inequalities and the unequal distribution of caring responsibilities, along with how pensions are treated on divorce.

While the adequacy part of a recent Pensions Review was due to consider the gender pensions gap among others, late last year the Treasury reportedly kicked the project into the long grass. 

While carer’s credits for state pension entitlement have helped reduce inequality in state provision, the fact the UK pension system relies largely on pillar 2 saving means labour market inequalities are amplified in retirement. 

With higher childcare support, the government is among others seeking to further increase women's labour market participation, but for many women, saving more is still the only way the persistent pension gap can be closed.

Scottish Widows said it does not need to be a large amount; the provider calculated that an extra 1.15% would make up for a five-year contribution gap between the ages of 30 and 34. 

Arguing that education is as important as policy, managing director Jackie Leiper said: “Significant progress has been made towards gender equality in the last 115 years, but International Women’s Day still serves as a reminder of the remaining work that needs to take place. Women typically experience a shortfall in their retirement income due to taking longer career breaks, notably for caring responsibilities. This not only affects their pension contributions, it also holds them back financially.”  

Leiper advised women: 

Women reach retirement age with around half the average savings of men, remarked Catherine Foot, director of Phoenix Insights, based on a survey commissioned by Phoenix that found men have on average £146,100 saved for retirement while this is £67,200 for women. 

 

“While pay is a major reason behind this, our research found the disparity is made worse by life events that women can face – such as motherhood, divorce, caring responsibilities, and menopause – which disproportionately affect their ability to save,” she said.  

 

Foot noted that by mid-life, even though women typically contributing a higher proportion of their income, men pay nearly £80 more per month into their pension. 

  

She called on employers to support women to stay in the workforce as they perform core functions for society like caring. This should include greater workplace flexibility around caring commitments or a significant life event, and expanding the accessibility of workplace pension saving, she said, noting that women are much more likely than men to fall below the minimum auto-enrolment earnings threshold. 

  

“Achieving an adequate retirement income should be a possibility for all, and meaningful progress to address the gender pension gap is fundamental to reaching this goal,” she said.